One of our problems, of course, is the difficulty in paying higher rates than we now pay, even if the rate ceilings permit it. Chart 4 is reproduced from the Economic Report of the President which was transmitted to the Congress early this month. I have brought the chart up to date by reflecting on it the effect of the most recent changes in the rate ceilings on our cost of money.

As is clearly evident from chart 4, savings and loan gross earnings have been rising very slowly, even though mortgage interest rates, the rate on new loans made, have increased sharply in the last few years. We have a problem because of the very nature of the very nature of the assets in which we may invest, and because we did the kind of job the Congress expected and wanted us to do in the years past.

If our institutions could gain the savings momentum we had in the first half of the decade of the 1960's, we would be gaining in savings each year, approximately $14 to $15 billion instead of the $4 billion we gained in savings in 1969.

Now, this difference of $10 billion in what our momentum in earlier years produced, down to the $4 billion we gained in 1969, the difference of $10 billion would finance 500,000 homes in 1 year, at an average loan of $20,000.

That is a lot of homes. I know the members of this committee realize this, but not enough people realize how significant the savings and loan business is to the mortgage market. Last year, which was a poor year for us, our institutions made almost $22 million in home loans. Congressional proposals suggest adding, $2, $3, or $4 billion to the mortgage market. In past years, 1963, 1964, and 1965, our institutions loaned $2 billion a month.

Chart 5 shows the annual amount of loans made by our associations and also the number of private housing starts year-by-year. So, we make the case that the simplest way for Congress to help the home mortgage market and to stimulate home building is to pass such laws, or to get the administration to take such steps, as to increase our lending capacity, at least by 20 or 25 percent. Because, as you know, money that comes to savings and loan association, in contrast to other institutions, will be invested wholly in mortgages, primarily on singlefamily homes.

I know that this committee is very interested in housing for lowincome families and inner-city lending. In order to help our people make these loans, we have scheduled three clinics, three urban lending clinics in the next few weeks. The first will be held in Chicago next Monday and Tuesday and I've got a copy of the announcement of these clinics here. My full statement gives some statistics of the extent of

the involvement of our institutions in inner-city lending and in participation in these new Federal programs.

Now, before I get onto some specific recommendations, I want to point out one more fact of life currently in the savings and loan busi

ness.

Since the first of this year, savings balances in our institutions have shrunk about $1.6 billion. This decline in savings simply means that there are about 80,000 homes we are not going to finance. What we ought to have is a $1.6 billion gain which we could have had if we hadn't had the Treasury competing with us in the consumer savings market, and if we could have what we have earnestly requested, namely; a one-half-point spread over the rates paid by the commercial banks, preferably at a level which would have permitted us to keep our cost of money low enough to permit us to charge reasonable rates to home buyers.

Now, in connection with the competitive efforts of the banks to obtain savings, and that is the commercial banks, there is a very disturbing, recent development which the banking agencies so far have shown no signs of trying to arrest or stop. I refer to the issuance of very highrate subordinated notes sold directly by commercial banks and obviously aimed at attracting consumer savings dollars. This started with the First Pennsylvania Bank. I have here an advertisement that appeared in the Philadelphia Inquirer, on January 6. You can see it here as I hold it up.

At about the same time, a small bank in Kankakee, Ill., came out with a similar offering. This isn't quite a full-page ad, but it is a pretty good sized ad, and here is a copy of the ad which appeared in the Kankakee paper. We thought that with the new high rates authorized by the Federal Reserve under regulation Q, the banks would not pursue this particular method of getting more money, and much of it from our institutions, but we were wrong. Since the regulation Q ceilings were changed, a commercial bank in Atlanta, one in Denver, and another in Cincinnati have come out with these kinds of offerings, and the rates are going higher.

Now, here are some samples of these ads. This is an ad that appeared in Atlanta, the Trust Company of Georgia. Here is an add that appeared in a Denver paper, the one in Denver for three banks and an ad that appeared in the Cincinnati paper, from the Providence Bank in that city.

(The advertisements referred to follow :)

This

ont le saither an offer to call or a coliditation of an offer to buy these securities. The offer is made only by the Circular, which is available at any office of Past Pyrants Bank

74% interest on your money

NEW ISSUE $20,000,000

7% CAPITAL NOTES SUBORDINATED

Term: 30 Months from Issue Date.

Denomination: $100 or any multiple thereof.
Registration: All Notes will be fully registered
as to principal and interest.

Interest: Notes are available with all interest

deferred to maturity, with interest payable annually.
or, in the case of Notes of $1000 or more,

with interest payable quarterly. All interest payable
before maturity will be mailed to the registered
owners of the Notes.

As capital securities of the Bank these Notes are
subordinated in right of payment in the event of the
Bank's insolvency or liquidation, to the prior
payment of deposits in the Bank and of all claims
of other creditors of the Bank except those holding
securities on a parity with the Notes or expressly
subordinate to them.

First Pennsylvania Bank

The Pat Pembing and Trust Company

SERIES I DUE DECEMBER 31, 1976 72% SERIES III DUE DECEMBER 31, 1979 8%

INTEREST PAYABLE QUARTERLY

PURCHASE PRICE-AT PAR

Issued in Multiples of $1,000

Copies of the offering circular and applications to purchase are available
at the First Trust & Savings Bank and can be obtained by completing and
returning the attached coupon or calling in person at the Bank.

FIRST TRUST & SAVINGS BANK

138 SOUTH SCHUYLER AVENUE, KANKAKEE, III. 60901

TELEPHONE 939-2551

Gentlemen:

I may be interested in purchasing Capital Notes of the First Trust &
Savings Bank of Kankakee. Please send me an offering circular.
Name

Address

Telephone No..

THESE SECURITIES WILL BE ISSUED IN MULTIPLES OF $1,000 ONLYI

Announcing Trust Company's new more-for-your-money Investment Notes.

No other banking group in Georgia offers anything
like them. Our new Investment Notes pay 72%
annually, and they mature in 30 months. Investment
Notes may be purchased by any individual, business or
other organization for as little as $500 or in any multiple
of $100 over that amount. Interest on all Investment
Notes under $1,000 is paid at maturity.

On Investment Notes above that amount, interest

may be paid quarterly or at maturity.

Payment of principal and interest on these Investment Notes is subordinate to the prior payment of all Trust Company depositors in the event of the bank's liquidation or insolvency. For details on our new 72% Investment Notes, just call (404) 588-8401 or stop by any Trust Company office, where you get more for your money.

Trust Company

the-more-for-your-money bank.

TRUST
COMPANY

Also available through our associate, Peachtree Bank & Trust Company, Chamblee, and other
Trust Company Banks in Georgia.